Income Tax (Trading and Other Income) Bill

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Session 2004 - 05
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Income Tax (Trading and Other Income) Bill

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
429

follows.
      (2)
For subsection (1) substitute—
“(1)
If—
(a)
immediately before the happening of a chargeable event, two
or more persons have relevant interests in the rights
5
conferred by the policy or contract in question, and
(b)
any of those persons is a company,

section 547 shall have effect in relation to each such company as if it
had been the only person with a relevant interest in those rights, but
with references to the amount of the gain construed as references to
10
the company’s proportionate share of the amount of the gain.”
      (3)
In subsection (15) for the definition of “foreign institution” substitute—
““foreign institution” means a person which is a company or
other institution resident or domiciled outside the United
Kingdom;”.
15
      (4)
For subsection (16) substitute—
“(16)
For the purposes of this section, property held for the purposes of a
foreign institution shall be regarded as in the beneficial ownership of
the foreign institution.
(17)
Any reference in this section to trusts created by an individual
20
includes a reference to trusts arising under—
(a)
section 11 of the Married Women’s Property Act 1882;
(b)
section 2 of the Married Women’s Policies of Assurance
(Scotland) Act 1880; or
(c)
section 4 of the Law Reform (Husband and Wife) Act
25
(Northern Ireland) 1964;

and references to the settlor or to the person creating the trusts shall
be construed accordingly.”
218
In section 548(1) (deemed surrender of certain loans) for paragraph (a)
substitute—
30
“(a)
a gain arising in connection with a policy or contract would
be—
(i)
treated as forming part of the income of a company
under section 547(1)(b), or
(ii)
a gain for which an individual is, or any trustees are,
35
liable to tax under Chapter 9 of Part 4 of ITTOIA 2005;
and”.
219
Omit section 549 (certain deficiencies allowable as deductions).
220
Omit section 550 (relief where gain charged at a higher rate).
221
Omit section 551 (right of individual to recover tax from trustees).
40
222   (1)
Amend section 552 (information: duty of insurers) as follows.
      (2)
In subsection (1) omit “within the meaning of this Chapter”.
      (3)
In subsection (5)—

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
430

(a)
in paragraph (b)(ii) for “, the date” to the end of the sub-paragraph
substitute “of this Act and section 514(1) of ITTOIA 2005 (chargeable
events where transaction-related calculations show gains), the date
on which the year and the insurance year end;”,
(b)
in paragraph (c)—
5
(i)
after “this Chapter” insert “and Chapter 9 of Part 4 of ITTOIA
2005”,
(ii)
after “relevant capital payments” insert “and the amount or
value of any capital sums of a kind referred to in section
492(1)(b) to (e) of ITTOIA 2005”,
10
(iii)
in sub-paragraph (iii) after “annuity” insert “determined in
accordance with section 656 and the amount of so much of
any payment previously made on account of an annuity as is
exempt under section 717 of ITTOIA 2005”, and
(iv)
in sub-paragraph (v) after “year” insert “and the total of the
15
amounts of gains treated as arising on previous chargeable
events within section 509(1) or 514(1) of ITTOIA 2005”,
(c)
for paragraph (e) substitute—
“(e)
the number of years relevant for computing the
annual equivalent of the amount of the gain for the
20
purposes of subsection (1) of section 536 of ITTOIA
2005 (top slicing relieved liability: one chargeable
event), apart from subsections (6) and (8) of that
section;”, and
(d)
for paragraph (f) substitute—
25
“(f)
on the assumption that section 465 of ITTOIA 2005
(person liable: individuals) has effect in relation to the
gain —
(i)
whether an individual would fall to be treated
as having paid income tax at the lower rate on
30
the amount of the gain in accordance with
section 530 of that Act; and
(ii)
if so, except in a case where paragraph (c)
above applies, the amount of such tax that
would fall to be so treated as paid.”
35
      (4)
In subsection (6)—
(a)
in paragraph (b)—
(i)
after “section 546C(7)(a)” insert “of this Act (and section
514(1) of ITTOIA 2005)”, and
(ii)
after “year” insert “(and the insurance year)”, and
40
(b)
in paragraph (c) after “section 546C(7)(a)” insert “of this Act (and
section 514(1) of ITTOIA 2005)”.
      (5)
In subsection (7)(b)—
(a)
after “section 546C(7)(a)” insert “of this Act (and section 514(1) of
ITTOIA 2005)”, and
45
(b)
after “year” insert “(and the insurance year)”.
      (6)
In subsection (9)(a)—
(a)
after “section 546C(7)(b)” insert “of this Act (and section 514(1) of
ITTOIA 2005)”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
431

(b)
after “occurs” insert “(and the end of the insurance year mentioned
in section 514(3) and (4) of ITTOIA 2005)”.
      (7)
In subsection (10)—
(a)
in the definition of “amount” after “section 553(3)” insert “of this Act
and section 528 of ITTOIA 2005”, and
5
(b)
insert in the appropriate place—
““chargeable event” means an event which is a
chargeable event within the meaning of this Chapter
and Chapter 9 of Part 4 of ITTOIA 2005;”.
223
In section 552ZA(3) (information: supplementary provisions) after “section
10
546C(7)(a)” insert “of this Act and section 514(1) of ITTOIA 2005”.
224   (1)
Amend section 552A (tax representatives) as follows.
      (2)
In subsection (5) omit “in relation to which this Chapter has effect and”.
      (3)
In subsection (12) insert in the appropriate place—
““capital redemption policy” means a capital redemption policy
15
in relation to which this Chapter and Chapter 9 of Part 4 of
ITTOIA 2005 have effect;”,
““contract for a life annuity” means a contract for a life annuity
in relation to which this Chapter and Chapter 9 of Part 4 of
ITTOIA 2005 have effect;”, and
20
““policy of life insurance” means a policy of life insurance in
relation to which this Chapter and Chapter 9 of Part 4 of
ITTOIA 2005 have effect;”.
225
In section 552B (duties of overseas insurers’ tax representatives) after
subsection (5) insert—
25
“(5A)
In subsection (5) “chargeable event” has the same meaning as in
section 552 (see subsection (10) of that section).”
226   (1)
Amend section 553 (non-resident policies and off-shore capital redemption
policies) as follows.
      (2)
For subsection (4) substitute—
30
“(4)
The number of days in the period referred to in subsection (3) shall
be calculated, where appropriate, from the issue of the earliest
related policy, that is, any policy in relation to which the policy is a
new policy within the meaning of paragraph 17 of Schedule 15, any
policy in relation to which that policy is such a policy, and so on.”
35
      (3)
Omit subsections (6) to (9).
      (4)
In subsection (10) in the definition of “foreign institution” for “section 547”
substitute “section 547A”.
227   (1)
Amend section 553A (overseas life insurance business) as follows.
      (2)
Omit subsection (3).
40
      (3)
In subsection (4), in the definition of “new non-resident policy”, for
“subsections (2) and (3)” substitute “subsection (2)”.
228   (1)
Amend section 553C (personal portfolio bonds) as follows.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
432

      (2)
In subsection (1) for “tax” substitute “corporation tax”.
      (3)
In subsection (2) for “tax”, in both places where it occurs, substitute
“corporation tax”.
      (4)
In subsection (3)(a) for “tax”, in the first place where it occurs, substitute
“corporation tax”.
5
      (5)
In subsection (4)—
(a)
for “tax” substitute “corporation tax”,
(b)
after paragraph (b) insert “or”,
(c)
in paragraph (c) for the words from “person or body of persons” to
the end of the paragraph substitute “company”, and
10
(d)
omit paragraph (d) and the word “or” before it.
      (6)
After subsection (9) insert—
“(9A)
The Treasury may by regulations make provision, in relation to any
policy or contract to which this subsection applies, for—
(a)
treating an event described in the regulations as if it were a
15
chargeable event, and
(b)
treating an amount determined in accordance with the
regulations as if it were a gain treated as arising on the
happening of a chargeable event.
(9B)
Regulations under subsection (9A) may make such provision for the
20
purposes only of enabling the gain to be taken into account in the
application of this Chapter to the policy or contract on the later
happening of a chargeable event.
(9C)
Regulations under subsection (9A) may make any provision for the
calculation of the amount of the gain which regulations under
25
subsection (1) may make for the calculation of the amount charged to
corporation tax by virtue of regulations under that subsection.
(9D)
Subsections (6), (8) and (9) apply to regulations under subsection
(9A).
(9E)
Subsection (9A) applies to a policy or contract if—
30
(a)
it is a personal portfolio bond, and
(b)
liability in respect of a gain arising in relation to it would arise
by virtue of any of sections 464 to 468 of ITTOIA 2005
(persons liable for tax under Chapter 9 of Part 4 of that Act).”
229
Omit section 554 (borrowings on life policies to be treated as income in
35
certain cases).
230   (1)
Amend section 556 (activity treated as trade etc. and attribution of income)
as follows.
      (2)
Omit subsection (1).
      (3)
For subsection (2) substitute—
40
“(2)
If—
(a)
under section 13(5) of ITTOIA 2005 a payment made to a
person is treated as made instead to the performer, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
433

(b)
the person to whom the payment is actually made is a
company within the charge to corporation tax,

the company is treated for corporation tax purposes as if the
payment had not been made to it.”
      (4)
In subsection (3)—
5
(a)
omit paragraph (a), and
(b)
in paragraph (b) for “tax (whether of the entertainer or sportsman or
of another person)” substitute “corporation tax”.
231
Omit section 557 (charge on profits).
232
In section 568(1) (deductions from profits of contributions paid under
10
certified schemes)—
(a)
after “section 74” insert “of this Act or section 33 of ITTOIA 2005”,
and
(b)
after “Case I of Schedule D,” insert “or under Part 2 of ITTOIA 2005,”.
233
In section 570(4) (payments under certified schemes which are not
15
repayments of contributions) for “any of the provisions of section 113 or
section 337(1)” substitute “section 337(1) above or section 18 of ITTOIA 2005
(companies beginning or ceasing to carry on trade)”.
234
In section 571(1) (cancellation of certificates) for “under Case VI of Schedule
D” substitute “(in the case of corporation tax, under Case VI of Schedule D)”.
20
235   (1)
Amend section 577 (business entertaining expenses) as follows.
      (2)
In subsection (1)(a)—
(a)
for “tax” substitute “corporation tax”, and
(b)
for “the Tax Acts” substitute “the Corporation Tax Acts”.
      (3)
In subsection (3)—
25
(a)
for “any person” substitute “any company”,
(b)
for “by him”, in the first and second places where it occurs, substitute
“by the company”, and
(c)
for “a member of his staff” substitute “an employee of the company”.
      (4)
In subsection (5)—
30
(a)
for “a person” substitute “a company”,
(b)
for “a member of his staff” substitute “an employee of the company”,
(c)
for “that person” substitute “the company”,
(d)
for “him” substitute “the company”, and
(e)
for “members of his staff” substitute “employees of the company”.
35
      (5)
In subsection (7)—
(a)
in paragraph (b) for “, profession or vocation” substitute “or
profession”, and
(b)
in paragraph (c)—
(i)
for “the members of a person’s staff” substitute “a company’s
40
employees”,
(ii)
for “that person” substitute “the company”, and
(iii)
for “a company”, in both places where it occurs, substitute
“the company”.

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
434

      (6)
In subsection (8)(b)—
(a)
for “him”, in both places where it occurs, substitute “the donor”, and
(b)
for “relevant tax period” substitute “accounting period”.
      (7)
Omit subsection (8A).
      (8)
In subsection (10)—
5
(a)
for “any person” substitute “any company”,
(b)
for “his trade” substitute “its trade”, and
(c)
for “by him” substitute “by the company”.
236   (1)
Amend section 577A (expenditure involving crime) as follows.
      (2)
In subsections (1) and (1A) for “tax” substitute “corporation tax”.
10
      (3)
In subsection (2)(a) for “the Tax Acts” substitute “the Corporation Tax Acts”.
237
In section 578(1) (housing grants) for “any tax purpose” substitute
“corporation tax purposes”.
238
In section 578A(1) (expenditure on car hire) for “tax” substitute “corporation
tax”.
15
239   (1)
Amend section 579 (statutory redundancy payments) as follows.
      (2)
In subsection (2)—
(a)
after “payment is made” insert “by a company”,
(b)
for “trade, profession or vocation”, in each place, substitute “trade or
profession”, and
20
(c)
for “the employer” substitute “the company”.
      (3)
In subsection (3)—
(a)
after “payment is made” insert “by a company”, and
(b)
for “the employer” substitute “the company”.
      (4)
In subsection (5) for “tax purposes” substitute “corporation tax purposes”.
25
      (5)
In subsection (6) for “the employer”, in both places, substitute “the
company”.
240
Omit sections 580A to 580C (relief from tax on annual payments under
certain insurance policies and immediate needs annuities).
241
Omit section 581 (borrowing in foreign currency by local authorities and
30
statutory corporations).
242
After section 581 insert—
“581A
  Interest on foreign currency securities etc.
Interest within section 755(1) of ITTOIA 2005 (interest on foreign
currency securities etc.) shall be paid without deduction of income
35
tax.”
243   (1)
Section 582 (funding bonds issued in respect of interest on certain debts) is
amended as follows.
      (2)
In subsection (1)—
(a)
in paragraph (a) for “all the purposes of the Tax Acts” substitute “all
40
the purposes of the Corporation Tax Acts”, and

Income Tax (Trading and Other Income) Bill
Schedule 1 — Consequential amendments
Part 1 — Income and Corporation Taxes Act 1988
435

(b)
in paragraph (b) at the beginning insert “where paragraph (a) above
or section 380 of ITTOIA 2005 (which makes provision similar to that
paragraph for income tax purposes) applies”.
      (3)
In subsection (2)—
(a)
after “subsection (1) above” insert “or section 380 of ITTOIA 2005”,
5
and
(b)
in paragraph (b)(ii)—
(i)
after “this section” insert “or section 380 of ITTOIA 2005”, and
(ii)
after “Case VI of Schedule D” insert “(corporation tax) or
under Chapter 2 of Part 4 of ITTOIA 2005 (income tax)”.
10
244
Omit section 583 (Inter-American Development Bank).
245   (1)
Section 584 (relief for unremittable overseas income) is amended as follows.
      (2)
In subsection (1)—
(a)
for “a person is chargeable to tax” substitute “a company is
chargeable to corporation tax”,
15
(b)
for “for the purposes of tax” substitute “for the purposes of
corporation tax”, and
(c)
for “he”, in each place where it occurs, substitute “the company”.
      (3)
In subsection (2)—
(a)
for “a person” substitute “a company”,
20
(b)
for “his” substitute “its”, and
(c)
for the words from “and tax” to “assessable,” substitute “and
corporation tax shall be assessable”.
      (4)
In subsection (4) for “a person becomes chargeable to income tax or”
substitute “a company becomes chargeable to”.
25
      (5)
Omit subsections (6)(a) and (7).
246
Omit section 585 (relief from tax on delayed remittances).
247
In section 586(1) (disallowance of deductions for war risk premiums) for “tax
purpose” substitute “corporation tax purpose”.
248   (1)
Amend section 587 (disallowance of certain payments in respect of war
30
injuries to employees) as follows.
      (2)
In subsection (1) omit “, or total income,” and for “tax purpose” substitute
“corporation tax purpose”.
      (3)
In subsection (2)(b) for “section 121” substitute “section 121(3).”
249
In section 587B(2) (gifts of shares, securities and real property to charities
35
etc.)—
(a)
in paragraph (b) after “section 83A” insert “of this Act, section 108 of
ITTOIA 2005”, and
(b)
for “section 550(2)(a) or (b)” substitute “sections 535 to 537 of ITTOIA
2005”.
40
250   (1)
Amend section 588 (training courses for employees) as follows.
      (2)
In subsection (1) for “person” substitute “company”.